Mortgage Glossary

Mortgage Glossary Terms: A

A building separate from the main structure on a property. Often used for a specific purpose, such as a workshop, storage shed or garage.

ACRE

43,560 square feet. A measurement of area.

ADDENDUM

A supplement to any document that contains additional information pertinent to the subject. Appraisers use an addendum to further explain items for which there was inadequate space on the standard appraisal form.

ADJUSTABLE-RATE MORTGAGE (ARM)

A mortgage with an interest rate that can adjust at pre-determined intervals. An ARM loan is typically fixed for the first 2, 3, 5, 7 or 10 years and can adjusts annually thereafter.

AGENT

A person who has been appointed to act on behalf of another for a particular transaction.

AMENITY

Any feature of a property that increases its value or desirability. These might include natural amenities such as location or proximity to mountains, or man-made amenities like swimming pools, parks or other recreation.

AMORTIZATION

The repayment of a loan through regular periodic payment.

AMORTIZATION SCHEDULE

The breakdown of individual payments throughout the life of an amortized loan, showing both principal contribution and debt service (interest) fees.

AMORTIZATION TERM

The length of time over which an amortized loan is repaid. Mortgages are commonly amortized over 15 or 30 years.

ANNUAL PERCENTAGE RATE (APR)

Is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

ANNUITY

A sum of money paid at regular intervals, often annually.

APPLICATION

A form used to apply for a mortgage loan that details a potential borrower's income, debt, savings and other information used to determine credit worthiness.

APPRAISAL

A ''defensible'' and carefully documented opinion of value. Most commonly derived using recent sales of comparable properties by a licensed, professional appraiser.

APPRAISAL REPORT

The end result of the appraisal process usually consists of one major standardized form such as, the Uniform Residential Appraisal Report form 1004, as well as all supporting documentation and additional detail information. The purpose of the report is to convey the opinion of value of the subject property and support that opinion with corroborating information.

APPRAISED VALUE

An opinion of the fair market value of a property as developed by a licensed, certified appraiser following accepted appraisal principals.

APPRAISER

An educated, certified professional with extensive knowledge of real estate markets, values and practices. The appraiser is often the only independent voice in any real estate transaction with no vested interest in the ultimate value or sales price of the property.

APPRECIATION

The natural rise in property value due to market forces.

ARMS LENGTH TRANSACTION

Any transaction in which the two parties are unconnected and have no overt common interests. Such a transaction most often reflects the true market value of a property.

ASSESSED VALUE

The value of a property according to jurisdictional tax assessment.

ASSESSMENT

The function of assigning a value to a property for the purpose of levying taxes.

ASSESSMENT RATIO

The comparative relationship of a property's assessed value to its market value.

ASSESSOR

The jurisdictional official who performs the assessment and assigns the value of a property.

ASSET

Any item of value which a person owns.

ASSIGNMENT

Transfer of ownership of a mortgage usually when the loan is sold to another company.

ASSUMABLE MORTGAGE

A mortgage that can be taken over by the buyer when a home is sold.

ATTACHED HOUSING

Any number of houses or other dwellings which are physically attached to one another, but are occupied by a number of different people. The individual houses may or may not be owned by separate people as well.

Mortgage Glossary Terms: B

BALLOON MORTGAGE

A mortgage loan in which the monthly payments are not large enough to repay the loan by the end of the term. So at the end of the term, the remaining balance comes due in a single large payment.

BALLOON PAYMENT

The final large payment at the end of a balloon mortgage term.

BANKRUPTCY

A Court proceeding to relieve the debts of an individual or business unable to pay its creditors. Bankruptcies remain on credit records for up to ten years and can prevent a person from being able to get a loan.

BILL OF SALE

A physical receipt indicating the sale of property.

BIWEEKLY MORTGAGE

A mortgage where you make "half payments" every two weeks, rather than one payment per month. This results in making the equivalent of 13 monthly payments per year, rather than 12, significantly reducing the time it takes to pay off a thirty year mortgage.

BROKER

An individual who facilitates the purchase of property by bringing together a buyer and a seller.

BUYERS AGENT

A Realtor who acts contractually on behalf of the buyer. Traditionally, and still in most cases, the Realtor is the Agent of the Sellers and is paid by them out of the proceeds of the sale. A Buyer's Agency Agreement allows a Realtor (with full disclosure to the sellers or their agent) to negotiate on behalf of the buyer, with no legal conflict of interest. The seller still pays the Buyer's Agent fees, but this is always spelled out and acknowledged in the Offer to Purchase.

BUY DOWN

Extra money paid in a lump sum to reduce the interest rate of a fixed rate mortgage for a period of time. The extra money may be paid by the borrower, in order to have a lower payment at the beginning of the mortgage. Or paid by the seller, or lender, as incentive to buy the property or take on the mortgage.

Mortgage Glossary Terms: C

CAP

Associated with Adjustable Rate Mortgages. A limit on how high monthly payments or how much interest rates may change within a certain time period or the life of the mortgage.

CASH-OUT REFINANCE

Refinancing a mortgage at a higher amount than the current balance in order to transform a portion of the equity into cash.

CHAIN OF TITLE

The complete history of ownership of a piece of property.

CLEAR TITLE

Ownership of property that is not encumbered by any counter-claim or lien.

CLOSING

The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. At the closing all final loan documents and contracts are signed with a notary.

CLOSING COSTS

All appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, title insurance, taxes and any points negotiated in the deal.

CLOSING DISCLOSURE (CD)

A five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage closing costs.

CLOSING STATEMENT

The document detailing the final financial arrangement between a buyer and seller and the costs paid by each.

CO-BORROWER

A second person sharing obligation on the loan and title on the property.

COLLATERAL

An asset which is placed at risk to secure the repayment of a loan.

COLLECTION

The process a lender takes to pursue a borrower who is delinquent on his payments in order to bring the mortgage current again. Includes documentation that may be used in foreclosure.

CO-MAKER

A second party who signs a loan, along with the borrower, and becomes liable for the debt should the borrower default.

COMMON LAW

As opposed to statute law. Laws that have been established by custom, usage and courts over many years.

COMMISSION

A percentage of the sales price or a fixed fee negotiated by an agent to compensate for the effort expended to sell or purchase property.

COMMITMENT LETTER

A written commitment from a lender to lend mortgage funds to specific borrowers as long as certain conditions are met within a specified time period before closing.

COMMON AREA ASSESSMENTS

Fees which are charged to the tenets or owners of properties to cover the costs of maintaining areas shared with other tenets or owners. Commonly found in condominium, PUD or office spaces.

COMMON AREAS

Any areas, such as entryways, foyers, pools, recreational facilities or the like, which are shared by the tenets or owners of property nearby. Commonly found in condominium, PUD or office spaces.

COMMUNITY PROPERTY

In many jurisdictions, any property which has been acquired by a married couple. The ownership of the property is considered equal unless stipulated otherwise by both parties.

COMPARABLES

An abbreviated term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property whose value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property

COMPOUND INTEREST

Interest paid on the principal amount, as well as any accumulated interest.

CONCESSIONS

Additional value granted by a buyer or seller to entice another party to complete a deal.

CONDOMINIUM

A development where individual units are owned, but common areas and amenities are shared equally by all owners.

CONDOMINIUM CONVERSION

Commonly, the conversion of a rental property such as an apartment complex into a CONDOMINIUM-style complex where each unit is owned rather than leased.

CONSTRUCTION LOAN

A loan made to a builder or home owner that finances the initial construction of a property, but is replaced by a traditional mortgage one the property is completed.

CONTINGENCY

Something that must occur before something else happens. Often used in real estate sales when a buyer must sell a current home before purchasing a new one. Or, when a buyer makes an offer that requires a complete home inspection before it becomes official.

CONTRACT

A legally binding agreement, oral or written, between two parties.

CONVENTIONAL MORTGAGE

A traditional, real estate financing mechanism that meets guidelines set by Fannie Mae and Freddie Mac relative to their standards for purchasing a given loan for resale into public debt markets and is not backed by any government or other agency (FHA, VA, etc.).

CONVERTIBLE ARM

A mortgage that begins as and adjustable, that allows the borrower to convert the loan to a fixed rate within a specific timeframe.

COST OF FUNDS INDEX (COFI)

An index of financial institutions costs used to set interest rates for some Adjustable Rate Mortgages.

CREDIT

A loan of money for the purchase of property, real or personal. Credit is either secured by an asset, such as a home, or unsecured.

CREDIT HISTORY

A record of debt payments, past and present. Used by mortgage lenders in determining credit worthiness of individuals.

CREDITOR

A person to whom money is owed.

CREDIT BUREAU

A company that collects and organizes information about an individual's credit and payment habits. The 3 national credit bureaus are Experian, TransUnion, and Equifax.

CREDIT REPORT

A detailed report of an individual's credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals.

CREDIT SCORE

A numerical assessment assigned to the customer by credit bureaus that represents a measurement of the customer's overall credit rating. The scores are weighted and range from approximately 365 to 840. Low scores reflect a "high risk", while higher scores reflect a "lower risk". Each credit bureau has its own credit score system.

Mortgage Glossary Terms: D-E

DEBT

An obligation to repay some amount owed. This may or may not be monetary.

DEED

A document indicating the ownership of a property.

DEED-IN-LIEU (OF FORECLOSURE)

A document given by a borrower to a lender, transferring title of the property. Often used to avoid credit-damaging foreclosure procedures.

DEFAULT

The condition in which a borrower has failed to meet the obligations of a loan or mortgage.

DELINQUENCY

The state in which a borrow has failed to meet payment obligations on time.

DEPOSIT

Cash given along with an offer to purchase property, Also called EARNEST MONEY.

DEPRECIATION

The natural decline in property value due to market forces or depletion of resources.

DISCOUNT POINTS

Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount.

DISTRESSED PROPERTY

A mortgaged property which has been foreclosed on.

DUPLEX

A single-building improvement which is divided and provides two units which serve as homes to two families.

DOWN PAYMENT

An amount paid in cash for a property, with the intent to mortgage the remaining amount due.

EARNEST MONEY DEPOSIT

A cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.

EASEMENT

The right of a non-owner of property to exert control over a portion or all of the property. For example, power companies often own an easement over residential properties for access to their power lines.

EFFECTIVE AGE

The subjective, estimated age of a property based on its condition, rather than the actual time since it was built. Excessive wear and tear can cause a property's effective age to be greater than its actual age.

EMINENT DOMAIN

The legal process whereby a government can take ownership of a piece of property in order to convert it to public use. Often, the property owner is paid fair-market value for the property.

ENCROACHMENT

A building or other improvement on one property which invades another property or restricts its usage.

ENCUMBRANCE

A claim against a property. Examples are mortgages, liens and easements.

EQUAL CREDIT OPPORTUNITY ACT (ECOA)

Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

EQUITY

The difference between the fair market value of a property and that amount an owner owes on any mortgages or loans secured by the property.

ESCROW

An amount retained by a third party in a trust to meet a future obligation. Often used in the payment of annual taxes or insurance for real property.

ESTATE

The total of all property and assets owned by an individual.

Mortgage Glossary Terms: F-J

FAIR CREDIT REPORTING ACT

A federal law regulating the way credit agencies disclose consumer credit reports and the remedies available to consumers for disputing and correcting mistakes on their credit history.

FAIR MARKET VALUE

The price at which two unrelated parties, under no duress, are willing to transact business.

FANNIE MAE

A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation's largest source of financing for home mortgages.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)

The U.S. Government agency created in 1933 which maintains the stability of and public confidence in the nation's financial system by insuring deposits and promoting safe and sound banking practices.

FEDERAL HOUSING ADMINISTRATION (FHA)

A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930's to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally-subsidized mortgage insurance for private lenders.

FEE SIMPLE

A complete, unencumbered ownership right in a piece of property.

FHA MORTGAGE

A mortgage that is insured by the Federal Housing Administration (FHA).

FIRST MORTGAGE

The primary loan or mortgage secured against your house and property which has precedence over all other mortgages.

FIXED-RATE MORTGAGE (FRM)

A mortgage which has a fixed rate of interest over the life of the loan.

FLOOD INSURANCE

Supplemental insurance which covers a home owner for any loss due to water damage from a flood. Often required by lenders for homes located in FEMA-designated flood zones.

FORECLOSURE

The process whereby a lender can claim the property used by a borrower to secure a mortgage and sell the property to meet the obligations of the loan.

FORFEITURE

The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property.

FUNDING

The disbursement of loan funds, either by check or by wire transfer from the lender to the loan closing agent.

GIFT LETTER

A letter to the lender from the donor stating a gift of money has been made to the buyer in order to purchase specific property. The relationship of the donor and donee is stated, as well as the amount of the gift.

GINNIE MAE

A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income homebuyers.

GOOD FAITH ESTIMATE (GFE)

A document which tells borrowers the approximate costs they will pay at or before settlement.

GROSS INCOME

The total amount the borrower earns per year, before any expenses are deducted.

HAZARD INSURANCE

Insurance covering damage to a property caused by hazards such as fire, wind and accident.

HOME EQUITY LINE OF CREDIT

A type of mortgage loan that allows the borrower to draw cash against the equity in his home.

HOME INSPECTION

A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value.

HOME INSPECTOR

A person who performs professional home inspections. Usually, with an extensive knowledge of house construction methods, common house problems, how to identify those problems and how to correct them.

HOME MORTGAGE DISCLOSURE ACT (HMDA)

This act requires mortgage companies to report selected information to the Federal government about each application received. HUD (US Department of Housing and Urban Development) uses HMDA to detect discrimination and identify trends in lending patterns.

HOMEOWNER'S ASSOCIATION

An organization of home owners in a particular neighborhood or development formed to facilitate the maintenance of common areas and to enforce any building restrictions or covenants.

HOMEOWNER'S INSURANCE

A policy which covers a home owner for any loss of property due to accident, intrusion or hazard.

HOMEOWNER'S WARRANTY

An insurance policy covering the repair of systems and appliances within the home for the coverage period.

HUD MEDIAN INCOME

Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

HUD-1 STATEMENT

A standardized, itemized list, published by the U.S. Department of Housing and Urban Development (HUD), of all anticipated CLOSING COSTS connected with a particular property purchase.

INCOME APPROACH

The process of estimating the value of property by considering the present value of a stream of income generated by the property.

INCOME PROPERTY

A piece of property whose highest and best use is the generation of income through rents or other sources.

INSPECTION

The examination of a piece of property, its buildings or other amenities.

INTEREST RATE

A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.

INVESTMENT PROPERTY

Any piece of property that is expected to generate a financial return. This may come as the result of periodic rents or through appreciation of the property value over time.

JUDGMENT

An official court decision. If the judgment requires payment from one party to another, the court may put a lien against the payee's property as collateral.

JUMBO LOAN

A mortgage loan for an amount greater than the limits set by Fannie Mae and Freddie Mac. Often called non-conforming loans.

Mortgage Glossary Terms: K-M

LEASE

A contract between a property owner and a tenant specifying the payment amount, terms and conditions, as well as the length of time the contract will be in force.

LEGAL DESCRIPTION

The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection.

LENDER

The person or entity who loans funds to a buyer. In return, the lender will receive periodic payments, including principal and interest amounts.

LIABILITIES

A person's outstanding debt obligations.

LONDON INTER-BANK OFFERING RATE (LIBOR)

The rate at which banks in the foreign market lend dollars to one another. LIBOR varies by deposit maturity. A common interest rate index; one of the most valid barometers of the international cost of money.

LIEN

A claim made against a property for the payment of a debt or obligation related to the property or its owners.

LIFE CAP

A limit on how far the interest rate can move for an Adjustable Rate Mortgage.

LOAN APPLICATION (1003)

The form potential customers must complete to apply for a home loan. This application is commonly referred to as "the 1003" and is produced by the Federal government.

LIQUID ASSET

Any asset which can be quickly converted into cash at little or no cost, or cash itself.

LOAN

Money borrowed, to be repaid with interest, according to the specific terms and conditions of the loan.

LOAN ESTIMATE (LE)

A three-page form that you receive after applying for a mortgage. The form provides you with important information, including the estimated interest rate, monthly payment and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future.

LOAN OFFICER

A person that "sells" loans, representing the lender to the borrower, and the borrower to the lender.

LOAN ORIGINATION

How a lender refers to the process of writing new loans.

LOAN SERVICING

The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc. Typically carried out by the company you make payments to.

LOAN-TO-VALUE RATIO (LTV)

The comparison of the amount owed on a mortgaged property to its fair market value.

LOCK-IN

An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time.

LOCK-IN PERIOD

The amount of time the lender has guaranteed an interest rate to a borrower.

MANUFACTURED HOUSING

Once known as ''mobile homes,'' manufactured housing is any building which has been constructed off site, then moved onto a piece of real property.

MARGIN

The difference between the interest rate and the index on an adjustable rate mortgage.

MATURITY

The date on which the principal balance of a financial instrument becomes due and payable.

A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral.

MORTGAGE BANKER

A non-depository financial institution that specializes in originating and servicing loans. They generally sell their loans to investors, but may continue to service them.

MORTGAGE BROKER

A person or organization that serves as a middleman to facilitate the mortgage process. Brokers often represent multiple mortgage bankers and offer the most appropriate deal to each buyer.

MORTGAGEE

The entity that lends money in a real estate transaction.

MORTGAGE INSURANCE

A policy that fulfills those obligations of a mortgage when the policy holder defaults or is no longer able to make payments.

MORTGAGE INSURANCE PREMIUM (MIP)

A fee that is often included in mortgage payments that pays for mortgage insurance coverage.

MORTGAGOR

The entity that borrows money in a real estate transaction.

MULTIPLE LISTING SERVICE (MLS)

A service of a local Real Estate Board which publishes and exchanges details of properties registered with them.

Mortgage Glossary Terms: N-P

NEGATIVE AMORTIZATION

When the balance of a loan increases instead of decreases. Usually due to a borrower making a minimum payment on an Adjustable Rate Mortgage during a period when the rate fluctuates to a high enough point that the minimum payment does not cover all of the interest.

NET DISPOSABLE INCOME

Money left after subtracting the principal, interest, taxes and insurance and all other obligations from a borrower's monthly net income. This is the amount the borrower has available for living expenses after housing expenses are subtracted.

NET WORTH

The value of all of a person's assets, including cash, minus all liabilities.

NO-COST LOAN

Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

NO-POINT LOAN

A loan with no "points". The interest rate on such a loan will be higher than a loan with points paid. Also sometimes refers to a refinance loan where closing costs are included in the loan.

NON-CONFORMING USE

The use of land for purposes contrary to the applicable municipal zoning specifications. Often occurs when zoning changes after a property is in use.

NON-OWNER OCCUPIED

A property used as a residence by a renter/tenant instead of the owner of the property.

NOTE

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

NOTE RATE

The interest rate stated on a mortgage note.

NOTICE OF RECISION

Borrowers' signed acknowledgement that they wish to cancel their loan. This generally must occur within a specified number of days after a loan closing.

NOTICE OF RIGHT TO CANCEL

Under Regulation Z, customers must be notified they are entering into a transaction that will result in a lien against their primary residence. This document explains they have the right to cancel the transaction, at no cost, within 3 business days from the date of signing the closing documents on a loan.

OCCUPANCY

A physical presence within and control of a property.

OCCUPANCY RATE

The percentage of properties in a given area that are occupied.

ORIGINATION FEE

The fee charged by a lender to prepare loan documents, run credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.

OWNER FINANCING

A transaction where the property owner provides all or part of the financing.

OWNER OCCUPIED

The state of property wherein the owner occupies at least some portion of the property.

PERIODIC PAYMENT CAP

The limit on how much regular monthly payments on an Adjustable Rate Mortgage can change during one adjustment period.

PERIODIC RATE CAP

The limit on how much the interest rate on an Adjustable Rate Mortgage can change during any one adjustment period.

PERSONAL PROPERTY

Owned items which are not permanently affixed to the land.

PERSONAL RESIDENCE

The primary domicile of a person or family.

PITI

Principal, Interest, Taxes and Insurance.

PLANNED UNIT DEVELOPMENT (PUD)

A coordinated, real estate development where common areas are shared and maintained by an owner's association or other entity.

POINT

A percentage of a mortgage amount (one point = 1 percent).

PRE-APPROVAL

The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers.

PREPAYMENT

Payment made that reduces the principal balance of a loan before the due date and before the loan has become fully amortized.

PREPAYMENT PENALTY

A fee that may be charged to a borrower who pays off a loan before it is due.

PRE-QUALIFICATION

Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan.

PRIME RATE

The interest rate that banks and other lending institutions charge other banks or preferred customers.

PRINCIPAL

The amount owed on a mortgage which does not include interest or other fees.

PRINCIPAL BALANCE

The outstanding balance of principal on a mortgage. Does not included interest due.

PRIVATE MORTGAGE INSURANCE (PMI)

A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%.

PROFIT AND LOSS STATEMENT (P&L)

A statement documenting business revenues and expenses for a specified time period to establish whether a business gained a profit or suffered a loss.

PROPERTY

Any item which is owned or possessed.

PURCHASE AGREEMENT

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Mortgage Glossary Terms: Q-S

QUALIFYING RATIOS

Two ratios used in determining credit worthiness for a mortgage loan. One is the ratio of a borrower's monthly housing costs to monthly income. The other is a ratio of all monthly debt to monthly income.

QUITCLAIM DEED

A legal document operating as a release; intended to pass any title, interest or claim that the grantor may have in the property, but not containing any warranty that such title is valid, nor containing any warranty or covenants for title.

RATE LOCK

A guarantee from a lender of a specific interest rate for a period of time.

REAL ESTATE AGENT

A licensed professional who facilitates the buying and selling of real estate.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)

A federal law requiring lenders to give full disclosure of closing costs to borrowers.

REALTOR

A real estate agent or broker who is a member of the NATIONAL ASSOCIATION of REALTORS.

REFINANCE TRANSACTION

A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash.

REVOLVING DEBT

A type of credit that allows the borrower/customer to make charges against a predetermined line of credit. The customer then pays monthly installments on the amount borrowed, plus interest.

RIGHT OF FIRST REFUSAL

An agreement giving a person the first opportunity to buy or lease a property before the owner offers it for sale to others.

RURAL

An area outside of an established urban area or metropolitan district.

SALE PRICE

The actual price a property sells for, exclusive of any special financing concessions.

SALES COMPARISON APPROACH

An appraisal practice which estimates the value of a property by comparing it to comparable properties which have sold recently.

SECOND MORTGAGE

A loan secured by the equity in a home, when a primary mortgage already exists.

A loan that is backed by collateral. In the case of a mortgage loan, the collateral is the house.

SECTION 32

The section of the Federal Truth-in-Lending Act pertaining to high fee loans and the restrictions and compliance issues with which this type of loan transaction must comply.

SERVICER

A financial institution which collects mortgage payments from borrowers and applies the appropriate portions to principal, interest and any escrow accounts.

SERVICING

The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc. Typically carried out by the company you make payments to.

SINGLE-FAMILY PROPERTY

A property designed and built to support the habitation of one family with no common areas, no homeowners' dues or sharing of common walls.

SUBJECT PROPERTY

A term which indicates a property which is being appraised.

SURVEY

A specific map of a piece of property which includes the legal boundaries and any improvements or features of the land. Surveys also depict any rights-of-way, encroachments or easements.

Mortgage Glossary Terms: T-Z

TAX LIEN

A lien for outstanding or delinquent property, IRS or state taxes. Tax liens for delinquent property taxes are the most common and attach only to the property upon which the taxes are unpaid. Property tax liens always take priority over other liens.

THIRD PARTY ORIGINATION

When a lender uses a third party to originate and package loans for sale to the secondary market (Fannie Mae, Freddie Mac).

TITLE

The document that gives evidence of an individual's ownership of property.

TITLE COMPANY

An organization which researches and certifies ownership of real estate before it is bought or sold. Title companies also act at the facilitator ensures all parties are paid during the real estate transaction.

TITLE INSURANCE

A policy which insures a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise.

TITLE SEARCH

The process whereby the TITLE COMPANY researches a properties title history and ensures that no outstanding claims exist.

TRUTH IN LENDING

A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage.

UNDERWRITING

The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors, and the matching of this risk to an appropriate rate and term or loan amount.

UNIFORM RESIDENTIAL APPRAISAL REPORT (URAR)

The most common appraisal form in use. The URAR is used to document the methods used to determine the market value of single-family residences and planned unit developments.

URBAN

A term used to describe a property's location. Urban properties have paved access roads and streets; they are close to neighboring properties and have support services less than 10 miles away. Urban is also a term used to describe a property located in a city or town.

VA MORTGAGE

A mortgage that is guaranteed by the Department of Veterans Affairs (VA).

VARIANCE

An exception to municipal zoning regulations granted for a specific time period to allow for non-conforming use of the land.

VERIFICATION OF DEPOSIT (VOD)

A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

VERIFICATION OF EMPLOYMENT (VOE)

A document signed by the borrower's employer verifying his/her position and salary.

VERIFICATION OF MORTGAGE (VOM)

Documentation that establishes the customer's mortgage payment history.

VERIFICATION OF RENT (VOR)

Documentation that establishes the customer's rental payment history.

VESTED

Having the right to use a portion of a fund such as an IRA. Typically vesting occurs over time. If you are 100% vested, you have a right to 100% of the fund.

VETERANS AFFAIRS, DEPARTMENT OF (VA)

The successor to the Veteran's Administration, this government agency is responsible for ensuring the rights and welfare of our nation's veterans and their dependents. Among other duties, the VA insures home loans made to veterans.

WALK-THROUGH INSPECTION

A process whereby an appraiser examines a property in preparation for estimating its value. Also, the process of inspecting a property for any damage prior to that property being bought or sold.

WARRANTY

An affidavit given to stipulate the condition of a property. The person giving the warranty assumes liability if the condition turns out to be untrue.

ZONE

A specific area within a municipality or other jurisdiction which conforms to certain guidelines regarding the use of property in the zone. Typical zones include single-family, multi-family, industrial, commercial and mixed-use.